Senior Heimstaden executives participated as panellists at the PERE
Summit in London on June 14-16, one of the key events in the European real
estate calendar for institutional investors and asset managers. Chief
Investment Officer Christian Fladeland spoke on the Building Operating
Platforms panel and Tami Chuang, Managing Director for Client Relations &
Capital Raising spoke on the Leading Fund Manager strategies panel.
More than 400 delegates attended the panels
and presentations and about a fifth of attendees were institutional investors,
mostly coming from the UK and continental Europe.
Heimstaden attendees found
that while investors reflect on the implications of inflation and interest
rates, most remain steadfastly focused on long-term drivers to guide their
short and medium term investment decisions.
“A key takeaway was that
strategies built around demographic changes continue to resonate strongly,” Tami said afterwards. “Heimstaden has a resilient
position in this space given our focus on affordably priced homes and we value
the opportunity to share our views on how our scaled and vertically-integrated
platform enables us to better navigate the residential environment in Europe
than many of our competitors.”
Tami outlined Heimstaden’s
evergreen investment strategy and its expansion outside Scandinavia since 2018
in a panel focused on fund strategies.
She explained how the
company identifies growth markets by “being very
entrepreneurial and data driven in our decision making.”
Heimstaden’s Friendly Homes ethos to
managing its 150,000 units in nine countries ensures “we
really embrace a long term, socially acceptable business model around our
housing investment strategy,” she added.
Since real estate is an asset class that typically
offers investors some insulation from inflation through rents, the panel
devoted quite a lot of the session discussing which sectors would be most
impacted, the consequences for borrowing costs and the broader macroeconomic
considerations.
Heimstaden sees inflation lifting rents across its
regulated and non-regulated units, with the utility costs borne directly by the
tenants in many markets. Currently where it affects the operator is through labour
costs and building materials. This can be offset by adjusting the timing of
certain refurbishment programmes as well as through scaled procurement, often
with inventory in stock due to Heimstaden’s practice of using standardised
fixtures, appliances, and the like, she said.
The strategy behind operating residential properties
as a service was outlined in more details in the afternoon session by Christian
Fladeland in a panel focused on how managers create value for their assets.
Panellists were quizzed on their appetite for operational risk, when to
outsource, managing costs and how to manage operating partners.
Christian commented on how Heimstaden “has the
ambition to be fully vertically integrated - but of course, it requires
critical scale to actually make it viable.” This philosophy underlies
Heimstaden’s approach to market entry, where strong conviction on the long term
attractiveness of the market outweighs any market where the angle may be more
opportunistic.
Asked how Heimstaden drives value, he explained that scale
is important in finding efficiencies in the low margin business of property and
project management - dealing with the complexity of multiple small leases and amounts
of capital expenditure can easily lead to material performance drag. Heimstaden’s
operational and asset management teams are very much involved in underwriting
the business plan for the investments in order to anchor ownership of execution,
he said.
Challenged on how Heimstaden approaches scaling up its
operational platform, Christian said starting from scratch in a new country
comes at the expense of reduced momentum, even if Heimstaden has a playbook for
how to establish organisations and adapt to local market conditions. “We
prefer to do something that is a hybrid between starting from scratch and
acquiring a large existing platform by buying a small existing manager and
making them Heimstaden”.
“Owning the full value chain in-house improves the
quality of the offering but just as important we can create a ownership mindset
around business plan execution – something that we have had a very hard time driving
to its full potential when we have had outsourced services,”
he observed. “You need to establish a culture around it.”